The “improved” March employment numbers actually suck

There are a lot of Wall Street types, and D.C. types, and talking heads out there who are claiming that we have “turned the corner” on the employment/unemployment problem in America. These people are smoking crack. We had a good month in March for new hiring, but those numbers are artificial. There were a large number of construction jobs added, but only because of bad weather in February which caused a reduction in construction jobs. The US Bureau of the Census has started hiring temporary workers to go door to door to count all of the people who didn’t bother to send in the form. (FYI, if you send in the form, it only costs 44 cents to count you. If they have to come to your house, it costs about $60. Send in the form already.) The census will result in about one million jobs, but they are temporary jobs and they don’t “produce” anything. And with the huge budget deficits, we still have to find a way to pay those temp workers.

 

Unemployment has dropped slightly and we are actually adding jobs instead of shedding them. That sounds like good news. Except we are adding population at the rate of 211,000 people every month. And we only added 162,000 jobs in March, so we are still adding people faster than we are adding jobs. And March was the best month in a long time. According to the US Bureau of Labor Statistics, there are 6.2 people for every job opening, The average workweek is 34 hours. There are a large number of employers who are instituting furloughs to reduce hours worked. (I guess 34 hours per week is better then laid off.)

As we head into the summer budget sessions for the cities and states, more and more of them will be faced with hard choices which will include hiring freezes, furloughs, and layoffs. San Francisco and Los Angeles have already announced significant cutbacks. San Francisco has laid off 15,000 employees and Los Angeles has announced plans to close all non-essential offices two days per week. The State of California has announced plans to significantly reduce its prison population. Many states have already announced similar plans to cut prison expenses (Typically, by early release of prisoners who are perceived to pose the least risk.) Many states have also announced plans to cut education spending, including laying off teachers and staff. Many districts have announced plans to close smaller schools to consolidate operations. Infrastructure projects that are not being paid for with federal stimulus dollars are being put on hold.

The federal government is also cutting back on support for the real estate market. No more tax credits for first time home buyers. No more government purchases of home mortgages. Those programs were designed to support the housing/real estate/construction industries. Like it or not, interest rates are going to have to start going up. Maybe not much. Maybe not real soon. But it is going to happen. Then what happens to the real estate market? If interest rates go up, refinancing stops. If interest rates go up, you can’t afford as much house because the payment will be higher. If the government isn’t out there propping up the market, loans will be harder to qualify for, which means less people will qualify for mortgages and many of the people who do qualify will qualify for a smaller amount which means they have to buy a cheaper house.

Since the current recession started, the U.S. has shed over eight million jobs. It is going to take years (I predict more than five) to get back to same employment levels as 2006 and in the meantime, we will have added twelve million additional people, most of whom will want jobs. If we turned a corner, its into a very bad neighborhood.

 

Michael Baumer

 

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by Michael Baumer